Digital Finance Analytics (DFA) Blog – Page 95

Inflation Hotter Than Expected – Again!

The latest Australian inflation figures from the ABS came in hot, suggesting more rate rises from the RBA.

The Consumer Price Index (CPI) rose 1.8% this quarter. Over the twelve months to the September 2022 quarter, the CPI rose 7.3%. The most significant price rises were New dwelling purchases by owner-occupiers (+3.7%), Gas and other household fuels (+10.9%) and Furniture (+6.6%).

https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/sep-quarter-2022

Go to the Walk The World Universe at https://walktheworld.com.au/

ASIC’s Time Has Come…

News flash: Liberal Senator Andrew Bragg has given notice of a motion for a major inquiry into ASIC, which will be voted on tomorrow (Thursday). Labor currently opposes the inquiry, and the Greens haven’t taken a position yet.

Urgent: Call – today – the ALP and Greens Senators on the Economics References Committee to tell them they must support an inquiry. See their contact details below.

Whatever Senator Bragg’s motives, a major inquiry into ASIC is VERY important, as this will be the first specific, detailed, inquiry into ASIC since the 2018 Banking Royal Commission laid bare its many failures. And the Adams Report into ASIC’s very low rate of investigations – just 0.74% of all complaints – shows that it’s performance hasn’t improved.

An example of ASIC’s failure is Sterling First, which has left the lives of the elderly tenants ruined.

Below is the text of Senator Bragg’s motion:

Chair of the Economics References Committee (Senator Bragg): To move—

That the following matter be referred to the Economics References Committee for inquiry and report by the last sitting day in June 2024: (This will be a long, detailed inquiry.)

The capacity and capability of the Australian Securities and Investments Commission to undertake proportionate investigation and enforcement action arising from reports of alleged misconduct, with particular reference to:
(a) the potential for dispute resolution and compensation schemes to distort efficient market outcomes and regulatory action;
(b) the balance in policy settings that deliver an efficient market but also effectively deter poor behaviour;
(c) whether ASIC is meeting the expectations of government, business and the community with respect to regulatory action and enforcement;
(d) the range and use of various regulatory tools and their effectiveness in contributing to good market outcomes;
(e) the offences from which penalties can be considered and the nature of liability in these offences;
(f) the resourcing allocated to ensure investigations and enforcement action progresses in a timely manner;
(g) opportunities to reduce duplicative regulation; and
(h) any other related matters.

The Senators to call are:

Senator Nick McKim Greens:
02 6277 3601 senator.mckim@aph.gov.au

Senator David Shoebridge Greens:
02 6277 3169 senator.shoebridge@aph.gov.au

Senator Jess Walsh ALP:
02 6277 3744 senator.walsh@aph.gov.au

Senator Jana Stewart ALP:
02 6277 3004 senator.stewart@aph.gov.au

Twists And Turns In The Bond Market

Now Boris Johnston has said he is not standing for British PM, the path may be open to Rishi Sunak, to bring some sense to British Politics. But this does not necessarily solve the broader financial pressures we are seeing, for example in the Bond Market, in the UK and elsewhere.

Indeed, the Bank of England has said they will start selling short term government gilts as part of its QT programme, having recently bought bonds further out down the yield curve. This reminded me of the famous Operation Twist, a name given to a type of monetary policy operation performed by Central Banks which involves buying and selling government bonds in an effort to provide monetary easing for the economy, although it’s not quite as aggressive as quantitative easing. The term “Operation Twist” was first used in 1961–in a reference to a Chubby Checker song and the dance craze it engendered–when the Fed employed a similar policy.

Now of course Central Banks are trying to move to QT rather than QE, as well as higher interest rates to tame inflation.

But could we see this Twist type of operation again, as the battle to fight inflation, now stubbornly intrenched is driving rates higher, risking higher unemployment and even a recession. Could we see a whole new front open up in Economic Policy, using Twist type operations again?

It is conceivable this could create capacity for Governments to spend more (again). But wait, there is more.

If you then added in a Central Bank Digital Current, the central planners could then direct spending – and interest rates more specifically at certain sectors of the economy. For example, they might offer “cheap” money for small business investment, but “expensive” money for vehicle purchases as a potential mechanism to bring supply and demand back into balance, and so help address the inflation problem. This might mean rates would not need to go so high. It also expands the role of the Central Bank, to the point where it merges back in the Government Treasury operations.

So, I would not be at all surprised to see these old twist techniques becoming new again as Central Planners around the world try to put years of poor policy back in the bottle – by trying to control yet more elements of the economy – which is a ways away from Free Market Capitalism – but a Central Planners dream.

Go to the Walk The World Universe at https://walktheworld.com.au/